Insurance has always been a thing. But insurtech? It emerged only in 2010 when Friendsurance created the first peer-to-peer business insurance model. Nevertheless, in 2021, the global insurtech market size was already valued at $3.85 billion. Impressive enough, huh? But wait for it: from 2022 to 2030, analysts expect for the market to expand at a compound annual growth rate (CAGR) of 51.7%. Now, we're definitely talking! However, there's a question: what insurtech trends serve as rocket fuel that helps the money multiply at the speed of light and allow the industry to grow that rapidly?
In this article, we're going to answer that exact question. So buckle up, 'cause we're about to soar up high!
Director of Business Development
Coming Clean: What Is Insurtech?
Technologies are becoming an integrate part of increasingly more spheres of human life. One of the forces behind this is Millennials and Gen Z who took up the stage as new consumers. It doesn't seem realistic that these two generations would spend hours on visits to financial institutions to handle paperwork or to rest satisfied with non-personalized offers, like their predecessors baby boomers. As a result, even such industries as banking and insurance had to accept the fact that customer centrism is, well, at the center of it all. They also had to come to terms with the idea that if you don’t evolve, i.e., digitize to meet the needs of new clients more efficiently, you will no longer play the game.
That is why the insurance sector in particular decided to put the fruits of the modern times, i.e., technologies like AI, machine learning, blockchain, and so on, into its basket. At first, it was only startups that used technology, but incumbent insurance companies soon began to adapt, too.
To give a short definition, insurtech refers to the part of the insurance industry which utilizes technology to increase business efficiency via customer-centric business models.
Its benefits include:
- Enhanced customer satisfaction thanks to hyper-personalized insurance products;
- Efficiency of insurance procedures;
- Reduced operating costs.
But what specific issues does this field solve? Below, we have listed a few examples of how insurtech makes things easier and faster for both insurance businesses and their customers:
- Customer identity verification. In the finance industry, the Know Your Customer (KYC) procedure is mandatory for everyone. However, the process of ID verification might be quite lengthy, and you will hardly find a customer who'd be happy about that. Additionally, such information is highly sensitive, and security issues remain open. Luckily, technology like blockchain makes the exchange of documents seamless and fast. For example, IBM, that has been utilizing it to verify various credentials for some time now, writes, “Using blockchain technology, IBM Digital Credentials gain permissionability, immutability, and verifiability. Digital credentials, or even just attributes of a credential, can be shared using QR codes or private and public keys.”
- Claim processing. The traditional insurance claim process is a manual procedure which requires significant human and time resources: a specialist has to review each claim, decide on the compensation, and then remit it. However, the usage of technology helped accelerate the claims process and reduce operating costs: automation in repetitive workflows allow solving the majority of claims at the touch of a button. Today, you can also browse through options and file claims from anywhere in the world anytime.
- Underwriting processes. As The Balance defines it, “Insurance underwriting is the way an insurance company assesses the risk and profitability of offering a policy to someone. An insurance company must have a way to decide just how much of a gamble it's taking by providing coverage. It also needs to know the chances that something will go wrong, causing it to have to pay out a claim […] After looking at the risk involved, the insurance underwriter sets the insurance premium that will be charged in exchange for taking on this risk. As you can see, this procedure is quite complex. Nevertheless, you can gather most of the data for it automatically and improve underwriting processes. Predictive analysis helps estimate future losses, and the data can conclude on its own if a policy of an individual or a company should be extended. Such an approach reduces the possibility of human error and speeds up operations.
- Risk assessment. Modern tools allow insurance technology companies to collect large amounts of data and analyze it. As a result, it is significantly easier to detect unusual user behaviors. For example, Lemonade, a peer-to-peer company that works with house owners and renters, utilizes artificial intelligence to predict risks, quantify losses for customers, and help them pick the perfect insurance plan.
Now, when we are familiar with the areas that insurtech takes care of, we invite you to get acquainted with the digital trends of the insurance industry.
Climbing Up the Success Ladder: What Insurtech Trends Push the Industry Forward?
As we said earlier, customer expectations define what shape the insurance sector will take next. Thus, it is no wonder that the insurtech industry trends that we're going to talk about emerged as a response to the idea of customer centrism. We've already briefly mentioned a few technologies, but now let's discuss the moving force behind insurtech in depth.
Chatbots and Virtual Assistants for Better Customer Engagement
Today's customers expect to be able to contact their insurer online. Thus, chatbots and virtual assistants powered by artificial intelligence are a must for modern insurance companies. Such services are capable of providing answers to FAQs, as well as financial advice, which helps boost customer engagement and satisfaction. Here are a few use cases of AI that aid businesses deliver innovative insurance products:
A chatbot-based platform that assists insurance plan members and patients with insurance services and healthcare resources. It addresses symptom assessment, insurance underwriting process, monitoring of chronic diseases, etc. In 2021, they launched Virtual Primary Care that features a voice-enabled and character-based virtual assistant.
In 2017, this pay per mile car insurance company introduced AVA, an artificial intelligence claims assistant. The VA can verify claims in seconds and resolve them in no time. It guides customers through the process, helps collect damage photos, receive payments, and it even can use the data from the Metromile Pulse device to reconstruct the accident scene. To expand AVA's functionality, Metromile utilizes machine learning.
IQ, a chatbot of this health insurance company, answers FAQs and handles policy changes. Customers can pick an insurance plan, include an accident cover, and register a new family member in a chat window.
It is worth noting that while chatbots and VAs handle many routine tasks in the insurance industry, they do not replace the customer support stuff. Rather, they free their time to focus on complex cases that require actual human input.
Smart Contracts for Fast and Cost-Efficient Operations
Decentralized finance (DeFi) is gaining its momentum: the idea of a financial system that can do without a central authority holding all the power over finances in its hands is very appealing. So, instead of playing by the rules of a third party, DeFi offers consumers to gain control over their financial lives and engage in peer-to-peer operations. For that, DeFi utilizes blockchain technology and, more specifically, smart contracts, i.e., self-executing pieces of code written on top of a blockchain. What does that mean? They can execute all deals on their own once certain conditions have been met. For many insurance companies, utilization of this technology results in automation of claim processing and underwriting. It also helps not only to complete these operations significantly faster and with a higher level of quality, but also reduce the risks related to human interference since it is not possible to alter smart contracts. This is one of the most revolutionary insurtech trends of recent years.
Cloud for Handling Data with Ease
Legacy IT systems demand from their users to plan ahead for hardware or software infrastructure capacity and either purchase components or build them, which takes a lot of time and money. With a cloud-based storage, insurance companies can avoid that. It allows for speedy release and deployments and helps create a single ecosystem. There, due to the cloud computing power, you can make use of large data sets, get data-driven insights faster, analyze user behavior, detect fraud more efficiently, manage claims, and scale up right when you need it. By the way, 60% of the world’s corporate data is stored in the cloud.
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Drones and IoT Devices to Make Human Work Easier
Quite recently, drones have become an irreplaceable tool in insurance in general and in damage assessment in particular. Air surveillance allows insurance companies to inspect the areas that are too dangerous or inaccessible for humans. Those are disaster-prone territories, locations of natural disasters or accidents (i.e., hurricanes, wildfires, etc.), and contaminated sites. Drones with built-in infrared and high-zoom sensors can inspect damage to property, power lines, and substations, as well as water and air leaks. As you see, this allows not only to increase the safety of workers of the insurance sector, but also to assess damage more accurately and efficiently.
Such innovative insurance products as IoT (Internet of Things) devices track our activity: now, insurers can use data straight from sensors that surround us for risk prediction. McKinsey & Company writes, “Auto insurers, for example, have historically relied on indirect indicators, such as the age, address, and creditworthiness of a driver, when setting premiums. Now, data on driver behavior and the use of a vehicle, such as how fast the vehicle is driven and how often it is driven at night, are available.”
Sign Here: Conclusion
The insurance industry never had it easy because it takes care of the most unpredictable thing of all — life. However, the 21st century offers ways to simplify the work of insurers with the introduction of technology. Embracing insurtech solutions such as cloud, AI, machine learning, IoT, and others helps with risk assessment, underwriting, claims processing, and, consequently, improves business efficiency in general. On top of that, property and casualty insurance technology trends facilitate customer digital journeys and help deliver hyper-personalized customer experiences. And that is something that we all would like to have guaranteed.
Contact us if you need to launch an insurtech project! We will be glad to provide you assistance in insurtech market mapping or define the insurtech challenges that your business might face.